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Proofpoint Inc. (PFPT - Free Report) has demonstrated scintillating share price performance over the last two years. The stock, which was valued at $63 at the beginning of 2016, now currently trades close to $123, representing an approximately two-fold jump.

Year to date, Proofpoint’s shares have appreciated nearly 41.6%, way better than the S&P 500’s gain of 3.8%. The stock has also outperformed its industry which recorded growth of 29.9% during the same time frame.

This remarkable run can be primarily attributed to the company’s stellar financial performances. Notably, Proofpoint’s last quarterly results marked the ninth consecutive quarter of better-than-expected performance for the top and bottom lines. This apart, the company has witnessed significant year-over-year improvement on both the counts in these quarters as well.

Let’s take a look at what factors are driving Proofpoint’s back-to-back impressive quarterly performances.

Increased Migration to Office 365

As more and more enterprises are migrating to cloud, demand for healthier cyber-security measures has been on the rise. For the past few quarters, Proofpoint has been witnessing strong demand for its cyber-security suites from enterprises transitioning to cloud, particularly to Microsoft’s (MSFT - Free Report) Office 365.

Per the company, customers are looking for additional security capabilities that “complement and enhance the baseline solutions provided by Microsoft.” During 2017, a number of enterprises, which migrated to Office 365, bought the company’s security suit, including a significant number of Fortune 500 enterprises.

Proofpoint has made strategic acquisitions to expedite growth. In February 2018, the company signed a definitive agreement to buy Wombat Security Technologies, Inc. In 2017, the company made two important buyouts, Cloudmark, specializing in providing security protection for messaging services, and Weblife.io, a leader in browser isolation solutions. In 2016, the company acquired two businesses — FireLayers and the Email Fraud Protection (EFP) business unit from Return Path.

The aforementioned buyouts have not only expanded Proofpoint’s product portfolio, but also its customer and revenue base as well. We believe the company will continue its strategy of growing through acquisitions, which will help drive revenues.

Healthy Cybersecurity Market

Rising incidents of cyber attacks are benefiting Proofpoint as government and organizations have increased their security-related spending. Some of the most notable cyber attacks in the recent past include the two massive ransomware attacks — WannaCrypt or WannaCry in May 2017 and Petya in June 2017 — and one major data breach at Equifax (EFX - Free Report) reported in September 2017.

In early 2018, Expedia (EXPE - Free Report) reported a data breach where hackers stole customers’ information of 880K payment cards used on its consumer platform, as well as the partner’s platform where Orbitz is used as a booking engine.

All these have spurred demand for security-related products among enterprises and governments across the world. Per the latest research report from Gartner (IT), worldwide cybersecurity spending is likely to reach $96 billion in 2018 — marking 8% growth from the 2017 level of $89 billion. Another report from Markets and Markets suggests that the cyber security market is expected to witness CAGR of 11% in the 2017-2022 period.

We believe the demand for cyber-security solutions bodes well for Proofpoint as it will bring in new customers, thereby boosting its top-line performance.

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